Saving for retirement sounds like building wealth, but there’s a twist. After the saving is done, you’ll be wanting to convert that piggy bank into income for your golden years.

Do you bet it all on black, or is there a more sensible approach to investing for retirement? Save with SPP scouted the Interweb for some thoughts on the principles behind retirement investing.

Forbes magazine suggests retirement investors should take advantage of “tax advantaged accounts” available to them. In Canada, this would be things like a registered retirement savings plan (RRSP) or tax free savings account (TFSA).

The article suggests an “asset allocation” approach makes sense for retirement investing, with a portion of your investments targeting growth, through exposure to equities (stocks), and the rest to income, via fixed income investments, such as bonds.

You can either buy stocks and bonds directly, or via exchange-traded funds (ETFs) or mutual funds, the article adds.

Forbes believes that your age should help dictate the portion of your holdings that is in equities versus that in fixed income. In your 20s, the article notes, you should invest “90 to 100 per cent” in equities. By your 50s, you should be around 65 per cent equities and 35 per cent bonds, and once over 70, “30 to 50 per cent in stocks, 40 to 60 per cent bonds,” with the rest in cash.

At The Motley Fool Canada, dividend stocks are seen as one of the best investments in a retirement portfolio.

“You pay lower income taxes on dividend income from dividend stocks than your job’s income, interest income, and foreign income. Therefore, it is one of the best incomes to build up and grow as soon as you can. This low-taxed income will benefit you through retirement,” writes The Motley Fool’s Kay Ng.

She also notes that even if you have paid off your mortgage when you retire, you are still going to need income “to pay for home insurance, property taxes, and potentially utilities, condo, or home repair fees during retirement.”

Her article suggests real estate income trusts (REITs) are an investment well suited for your retirement portfolio. Owning REITs, she explains, is like owning shares in a property that is being rented out — you’ll get regular monthly income (like rent) and the value of the properties held by the REIT tend to go up over the long term.

The folks at MoneySense note the RRSP, now more than six decades old, is still a “go-to” for Canadian retirement investors.

The article begins by noting that the RRSP allows investments to grow on a “tax deferred basis,” meaning no taxes are owed until you take the money out in retirement. The Saskatchewan Pension Plan (SPP) operates very similarly, for tax purposes.

MoneySense agrees with the idea that Canadian dividend stocks make sense in your retirement investment portfolio, as they are taxed at a lower rate than foreign stocks in a non-registered account and aren’t taxed in a registered account.

Since the end game of retirement investing is converting savings to income, MoneySense notes the annuity — “which pays a fixed income for life” — is a good idea for some or all of your savings once you have retired.

So, let’s recap. You want to build your retirement portfolio with a mixture of dividend-producing stocks, and interest-producing (and lower risk) fixed-income investments. Real estate income is seen as beneficial both before and after retirement. When retirement begins, these sources will provide regular income, and if you want to guarantee the level of income, you can convert some or all of your holdings to an annuity.

If you’re hesitant about wading into this somewhat complex topic, another way to go is to join the SPP. SPP’s Balanced Fund is invested in Canadian, U.S. and international equities, but also bonds, mortgages, real estate, infrastructure and money market funds. The savings of SPP members are invested, at a very low cost, in a large pooled fund. And when it’s time to collect your SPP benefit, you can choose from a variety of annuity options for some or all of your account. Check out SPP today!

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The Kids’ Money Book by Jamie Kyle McGillian is that long talked-about and much-needed resource for young people that’s designed to teach them everything they need to know about money.

It’s written in a breezy, clear, and kid-friendly way, with plenty of diagrams, quizzes and fun facts. Although the book is intended for U.S. kids it is still totally relevant for a Canadian audience.

McGillian beings by remarking how her own two daughters used to spend all their pocket money on “candy and costume jewellery,” but have now graduated to coffee, music and apps for their phones. “In the past decade, as my little spenders have grown into big spenders, the world of money has changed, thanks to technology,” she writes.

A study by U.S. investment bank Piper Jaffray found “teens spend more of their cash on food than anything else” at places like Starbucks, Chipotle, Chick-fil-A and Panera Bread. Clothing is next, at 20 per cent, with top brands being Nike, Forever 21, American Eagle and Ralph Lauren, the book notes.

After a look at the history of money from bartering all the way up to bitcoin, the book’s first quiz doles out some good advice, such as to “nurture you own interests in responsible ways, make solid decisions that reflect good judgement,” and to “put a price on fashion and ask yourself — is it worth it?” Other advice is being generous and charitable.

“Grown-ups who don’t learn money sense when they are young often learn the hard way,” the book advises. “Even if they do avoid big money mistakes, always worrying about paying bills and not having enough money to take care of the family are not fun. Learn to make smart money decisions and you’ll have a better chance of leading the kind of life that you want to,” writes McGillian.

And that’s what the book does. A chapter on the difference between wants and needs leads the reader to logical conclusions. “It’s all right to have a lot of wants, but the idea is to keep them in check,” she writes.

Later, we learn that folks with money smarts don’t give in “to the little voice in his or her head that screams `I want it now,’” and are happy with what they have (and not unhappy about what they don’t have). That’s because they “know how to make money work” for themselves, are “usually careful and precise with money” and aren’t wasteful, the book advises.

The section on allowances advises kids not to “spend every penny of your allowance. Leave at least a little for savings and sharing.” As well, the book advises young readers to “think about it carefully” before committing to a large purchase.

The book talks about ways younger folks can earn more money than just allowance, through babysitting, car washing, caring for pets, or creating arts and crafts. There’s a chapter on how to “increase your earning power” by boosting your casual conversation skills, selling yourself and your abilities, and keeping a sense of humour.

There’s a great, simple little chapter on budgeting — set aside money for school lunch, snacks, clothes, entertainment, “drugstore and miscellaneous spending,” and you can have money left over “for saving, sharing and investing.”

On shopping, the book advises young folks to be smart consumers. “Comparison shop. Judge different brands of products against each other. Talk to friends and relatives before you buy. Find out what brands they are most satisfied with. Research the product.”

The “Investing 101” chapter provides a nice overview of bonds, stocks, exchange-traded funds (ETFs) and more. The credit card section highlights the good and importantly, bad things about credit cards — annual fees, interest charges, and the ability “to start spending more than you can actually afford.”

This is an excellent book that helps deliver the medicine of basic financial literacy with the sugar sweetness of gentle writing, lots of graphics, fun quizzes and simple examples. Well done Ms McGillian!

The Saskatchewan Pension Plan is open to Canadians 18 and older (up to age 71). Check out our video, What is a Pension Plan? (link) on our home page for an overview of this made-in-Saskatchewan retirement savings success story. It’s never too early to start saving for retirement!

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Financial author Kelley Keehn thinks women need to be in charge – not unwilling passengers – when it comes to steering their financial ships of state.

Her well-written (and entertaining) book, Rich Girl, Broke Girl provides step-by-step directions to help women gain control over debt, day to day expenses, investing and of course, retirement savings.

As the book opens, Keehn notes that while most women are told they can “financially achieve anything, dream as big as any man, accomplish anything,” they often get blamed if they fail, and are told to leave finances to “someone else in (their life),” or to “marry rich.”

The stats, she writes, show that many women don’t like others being in charge of their money. A full two-thirds of women “whose partners are the primary breadwinners feel trapped,” Keehn writes. “Seven in ten women wish they had more power in their financial futures,” she continues. “Sixty-four per cent of women wish they had their own money set aside just in case.”

She then tells the story of “Mack,” a young woman who tried to strike out on her own, but lacked financial knowledge, didn’t know the cost of things, tried to live an impossibly unaffordable life, blew her credit on a single trip, then got behind and didn’t ask for help, ultimately forcing her to move back home.

An “anti-budget,” Keehn writes, is the solution here. Track every dollar, categorize spending, multiply expenses by 12 to create an annual budget, and then “trim the excess… (and) reallocate.” Fictional Mack could save $3,255 a year, writes Keehn, by saving just 50 per cent on her discretionary expenses.

The book looks at the ins and outs of credit, and then, cohabitation.

“Have the money talk with your partner early,” Keehn advises. If your partner is a saver, and you are a “live for today” spender, that collision of views could harm the relationship, she notes.

There’s a great, detailed overview of investing, which looks at cash, fixed income and equities, as well as other investment vehicles. Keehn recommends a diverse approach to investing. Don’t invest in just one stock, but a diversified portfolio, she explains. Understand the risks of equity investing, but don’t fear them and put all your money in fixed-income, Keehn adds.

She explains the difference between buying stocks and bonds yourself versus buying units in mutual funds – the latter can have high fees, she warns.

Keehn points out how even the modest inflation we’ve experienced in the past five years can “erode your wealth.”

In the section on tax shelters, Keehn says it is best to think of registered retirement savings plans (RRSPs) and Tax Free Savings Accounts (TFSAs) “as an empty garage. You have to put “cars” (investments) into them, and depending on the rules of the tax shelter, there are different perks and penalties.”

With both, you can invest in a “plethora” of different vehicles, from “guaranteed investment certificates (GICs) and savings accounts to stocks, bonds, exchange-traded funds (ETFs), mutual funds and more.” Only the tax treatment of the “cars” is different – you get a tax deduction for funds placed in an RRSP, and they grow tax free, but are taxed when you take money out. There’s no tax deduction for putting funds in a TFSA, but no taxes on growth, and no taxes due on any income taken out of the TFSA.

She talks about the need to maximize your contribution to any company-sponsored retirement savings plan, because otherwise, “you are leaving money on the table.”

Keehn offers some thoughts on the idea of paying off mortgages quickly as a strategy – perhaps, she writes, it’s less of a good idea given the current low mortgage rates – if you have debts at a higher interest rate, perhaps they should be targeted first.

She’s a believer in getting financial advice when you run into problems.

“It’s natural to feel ashamed of our money mistakes. However, our problems compound when we can’t manage on our own and don’t seek help. Think of it this way: Would you formulate a health-improvement plan before going to your doctor to see what’s actually wrong with you? Probably not.”

This is a great, clear, easy-to-follow walk through about a topic that many people don’t like to deal with. If you’re living paycheque to paycheque, with no emergency savings, this book offers you a blueprint for getting out of trouble and building financial independence. It’s a great addition to your financial library.

Kelley Keehn spoke to Save with SPP last year and had great additional insights about the stress Canadians feel over money matters.

Did you know that in-year contributions you make to the Saskatchewan Pension Plan are tax-deductible? In 2022, you can contribute up to $7,000 per calendar year, subject to available RRSP room. As the book suggests, funds within a registered plan like SPP grow tax-free, and are taxed only when you convert your SPP savings to future retirement income. Check out SPP today.

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